With state aid down, no relief for towns in sight for many years

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Homeowners and local communities are facing tough, long-term financial squeezes that are putting an unprecedented strain on what should be a cooperative relationship.

Home prices are dropping but taxes keep rising, according to state figures, while a nonprofit report warns that towns face years of financial difficulty because of soaring costs for pensions and retirees’ health care.

Average assessed values fell in 45 of 48 local communities between fiscal 2010 and 2011, according to data from the state Department of Revenue released in November.

Values fell 5 percent or more in 16 towns, led by Halifax, where the average single-family home is assessed for about $286,000, down nearly 11 percent from a year earlier. Assessed values for fiscal 2011 are based on sales as of January 2010.

At the same time, property taxes continue to climb, with the median hike in local communities up about 3 percent. Locally, the average tax bill in 2011 ranged from $2,333 in Wareham to $9,898 in Cohasset.

The 76-page report from the Massachusetts Taxpayers Foundation, released earlier this month, lays out a difficult financial future for the state’s 351 cities and towns.

State aid to communities has fallen three years in a row, property tax growth had the smallest one-year increase in decades, and town budgets barely increased over the past two years, said the report.

Adding to the problem, money spent on employees continued to climb while unaddressed long-term costs for pensions and retiree health care loom like dark clouds on the horizon.

“Cities and towns are facing a permanent fiscal squeeze, in which costs are rising faster than revenues,’’ said Michael Widmer, president of the foundation.

The problem could last a decade or longer, he said. “It is a new fiscal reality.’’

Town budgets have barely increased over the past two years, even even as hard-hit communities tap into new tax streams, such as higher restaurant taxes.

Some communities may be in better shape, said Widmer, especially if they have a strong commercial base, wealthy residents willing to pass overrides, and are managed well.

But it is a difficult outlook overall, he said.

A few town officials see glimmers of hope, particularly with the state’s economy showing signs of recovering.

“I’m not trying to paint too rosy a picture,’’ said Cohasset Town Manager Michael J. Coughlin, “but looking toward the future, it is a little bit better than a year ago.’’

Construction is up - a new 225-unit apartment complex is being built - which means more property tax revenue, and more homeowners are doing work on their homes, he said.

Michael McCue, the town administrator in Avon, said the state has slowly been ratcheting up its efforts to make towns acknowledge future costs for pensions and health care for retirees and to set money aside.

It’s not easy coping with regular problems, such as drops in local revenue as well as from the state, while at the same time taking on new burdens, he said.

Avon has cut positions through attrition until there is not much left to cut, he said. For instance, the Highway Department is down to a superintendent and three laborers.

A new health care law that gives communities the ability to have public employee unions assume more costs has helped towns save, said McCue, and others.

Towns get most of their revenue from property taxes, state aid, and local receipts from items such as excise taxes.

With property taxes constrained by Proposition 2 1/2, state aid in years past has been counted on to provide financial growth for towns.

But state aid has been cut during the recession, and few expect the situation to change any time soon, since Massachusetts is struggling with many of the same financial problems as the towns.

“We’re not going to see state aid going up significantly,’’ said Westwood Town Administrator Michael A. Jaillet.

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